Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services.

Hasbro Earnings Are Back on the Growth Track; Stock Soars 14%

The toy maker's results suggest that it's shed the Toys R Us blues.

Toy maker Hasbro(NASDAQ:HAS) reported first-quarter 2019 results before the market opened on Tuesday. Revenue grew 2.3% -- nearly 6% in constant currency -- earnings per share (EPS) flipped to positive from negative, and EPS adjusted for one-time items more than doubled year over year.

Growth was driven by the company's digital and e-sports initiative, Magic: The Gathering Arena, along with several dependable staples, including Magic: The Gathering tabletop, Monopoly, Play-Doh, and Transformers.

Revenue growth was hurt by the strong dollar. Absent the foreign exchange effect, revenue rose 5.7% year over year.

For context -- though long-term investors shouldn't give too much importance to Wall Street's near-term estimates -- analysts were looking for an adjusted loss of $0.10 per share on revenue of $665.3 million. So Hasbro crushed both expectations.

What happened with Hasbro in the quarter?

Revenue from franchise brands climbed 9% year over year to $393.6 million, revenue from partner brands declined 14% to $172.0 million, Hasbro gaming revenue grew 2% to $107.6 million, and emerging-brands revenue soared 22% to $59.4 million. Partner brand revenue is driven by movie releases, so it will be "lumpy" on quarterly basis.

U.S. and Canada segment revenue edged up 1% year over year to $357.9 million, international segment revenue slipped 2% to $282.6 million (but rose 6% in constant currency), and entertainment and licensing revenue jumped 24% to $92.0 million.

Within international, revenue in Europe inched down 1% as reported, but grew a solid 8% in constant currency. This is an especially welcome result since Hasbro particularly struggled in Europe last year due to what management called a "rapidly evolving retail landscape."

What management had to say

Here's what CEO Brian Goldner had to say in the press release:

The global Hasbro team is executing very well and delivered a good start to the year. Our long-term investments in new platforms provided a meaningful contribution from our digital and e-sports initiative, Magic: The Gathering Arena, as well as growth in MAGIC: THE GATHERING tabletop revenues. In addition, MONOPOLY, PLAY-DOH, and TRANSFORMERS were among the brands posting revenue gains this quarter. We are beginning to see improvement in our commercial markets, notably in the U.S. and Europe, and operating profit was driven by high margin revenue growth and our cost savings activities. With most of the year ahead of us, we remain on track to deliver profitable growth for the full-year 2019.

Looking ahead

While it's still early in its recovery from the Toys R Us fallout and its struggles in Europe, Hasbro's results suggest that the company is back on the growth track.

While Hasbro doesn't provide guidance, Goldner said that it's "on track to deliver profitable growth for the full-year 2019." Moreover, CFO Deborah Thomas added that the company continues to "expect full-year net cost savings of $50-$55 million" from the implementation of the cost-savings initiatives it announced last year.